StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

The federal reserve - Essay Example

Cite this document
Summary
The Federal Reserve sets the nation’s monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates. (Federal Reserve System, 2011) Inflation, interest rates and employment are interdependent in an economy. Monetary…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER93.6% of users find it useful
The federal reserve
Read Text Preview

Extract of sample "The federal reserve"

Download file to see previous pages

Close co-ordination between the Federal Reserve and the Government of the USA is essential, because monetary policies should be in sync with fiscal policies for an effective and sustainable economic growth in the long run. The steps taken by the Federal Reserve, for example by increasing the interest rates to reduce inflation will have an impact on industrial production, consequently on employment. Therefore regulating interest rates in an economy by the Federal Reserve is a balancing act which takes into account several factors after analyzing the economic indicators.

The Federal Reserve has an option of regulating money supply in the economy to regulate growth. Providing liquidity into the economic system by regulating money supply has its impacts on financial markets. Handa (2009, p. 429) observed “Many central banks, especially in financially developed economies, nowadays choose to use the interest rate, rather than the money supply, as the primary monetary policy instrument, while leaving the money supply endogenous to the economy.” Any change in the federal fund rate has cascading effect on short-term and long-term interest rates, foreign exchange of USD and stock prices.

The cumulative effect of these impacts reflects in demand patterns and eventually spending by the businesses. In an economic slowdown, if the situation remains unchecked the multiplier effect caused in this process might lead to recession in the economy. Therefore, the role played by Federal Reserve in stabilizing economy through its monetary policies is very significant. Since policies of the Federal Reserve are concerned with employment, inflation and output, the economic indicators which are relevant in this regard are required to be carefully analyzed by the Federal Bank.

Several economic indicators relating to employment, inflation and output or growth are used for this purpose. Analysis of the National Employment Report will be useful in assessing the

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The federal reserve Essay Example | Topics and Well Written Essays - 1000 words - 1”, n.d.)
The federal reserve Essay Example | Topics and Well Written Essays - 1000 words - 1. Retrieved from https://studentshare.org/finance-accounting/1616272-the-federal-reserve
(The Federal Reserve Essay Example | Topics and Well Written Essays - 1000 Words - 1)
The Federal Reserve Essay Example | Topics and Well Written Essays - 1000 Words - 1. https://studentshare.org/finance-accounting/1616272-the-federal-reserve.
“The Federal Reserve Essay Example | Topics and Well Written Essays - 1000 Words - 1”, n.d. https://studentshare.org/finance-accounting/1616272-the-federal-reserve.
  • Cited: 0 times

CHECK THESE SAMPLES OF The federal reserve

The Federal Reserve was effective/successful in its management of the 'Great Recession'

The main area of focus in this paper is to evaluate the policies taken by the federal reserve before and during the crisis.... hellip; A close study has shown that the policies taken by the federal reserve were not successful enough to combat the financial crisis.... This main aim of this paper is to establish the inefficiency of the federal reserve in controlling the situation efficiently and to critically evaluate the policies it had adopted during this time period....
10 Pages (2500 words) Essay

How the Federal Reserve Was Successful in Its Management of the Great Recession

Name: Institution: Tutor: Course: Date: the federal reserve was successful in its management of the “Great Recession" Introduction In times of economic strains such as depressions, countries usually undergo a lot of stress in the management of their fiscal and monetary accounts.... This stunning turn of events led to the stunning application of stringent fiscal and monetary policies by the federal reserve so as to curtail the spread of the effects.... In responding to the unusually large size of the fiscal stimulus, the federal reserve noted that this was in consistency to the severe downturn and limited ability for the usage of interest rates nearing zero....
8 Pages (2000 words) Essay

Getting rid of the Federal reserve bank would solve americas problem

Some Republican presidential aspirants have demonstrated open rejection of the federal reserve System.... They have sited the US economic crisis as turmoil that emanated from poor policies guiding the federal reserve.... These politicians seem to use arguments floated by some economists who believe that the federal reserve System is a burden to the American people (Meltzer 199).... These restrictions influenced banking system in US in early 1900s leading to the creation of the federal reserve System in 1913 (Wells 2)....
5 Pages (1250 words) Essay

Criticisms of the Federal Reserve System

Who are the shareholders of the federal reserve?... the federal reserve - Fed is not owned by theAmerican government as most people think.... the federal reserve alone controls fiscal policy.... It is owned by twelve central banks some of which are foreign....
1 Pages (250 words) Assignment

The Effectiveness of the Federal Reserve in Stabilizing the Current Economy

The paper "The Effectiveness of the federal reserve in Stabilizing the Current Economy" highlights that the federal reserve Bank manages monetary policy, which increases or decreases the money supply through changes in the discount rate and changes in reserve requirements.... Monetary policy is influenced and managed by the federal reserve Board, and it is meant to increase or decrease the money supply through changes in the discount rate, open-market operations, and changes in reserve requirements Stable prices in a long-term run are requirements for moderate long-term interest rates, maximum employment, and sustainable output growth....
7 Pages (1750 words) Essay

Monetary policy: the Federal Reserve Bank of the U.S.A

In the paper “Monetary policy: the federal reserve Bank of the U.... ?? the author focuses on the monetary policy of the federal reserve Bank of the U.... This paper summarizes the article “Monetary Policy and the federal reserve”.... The conventional monetary policy of the federal reserve was mainly based on targeting the federal funds rate.... In the current economic scenario, banks are required to maintain an overall of 0% to 10% (Labonte, “Monetary Policy and the federal reserve: Current Policy and Conditions”)....
8 Pages (2000 words) Essay

The Federal Reserve in Stabilizing the Current Economy

The paper "the federal reserve in Stabilizing the Current Economy" states that in isolation, alterations in the money supply bring on transformations in aggregate demand.... An augment in the money supply amplifies aggregate demand, as well as a decline in the money supply, reduces aggregate demand....
8 Pages (2000 words) Coursework

Mortgages and the Federal Reserve

The intention of this paper “Mortgages and the federal reserve” to highlight the main economic factors affecting the rate of the federal reserve System, which is the lender of last resort and directly or indirectly influences interest rates on loans and borrowings for businesses and consumers.... An increasing trend could lead to inflation and make the federal reserve raise interest rates in order to slow growth....
3 Pages (750 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us